Accounts outstanding

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Member

I would be interested in hearing your thoughts on outstanding and overdue accounts. For those of you who allow credit, what are your normal terms? How long before you start to contact customers regarding overdue accounts? Does it make a difference if they are a regular or one time customer?

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Member

Having been in the credit industry for the past 15 years and a credit manager for most of that time I have a few insights.

1. Normal terms: vary greatly by country and industry. In North America the "standard" are 30 days but obviously as said it changes by industry, some are longer than others. In the UK it is also 30. In southern European the standard terms increase from anywhere from 30-60 days etc. etc.

2. Never contact and "overdue account". Pro-actively contact all accounts prior to them falling due for payment, make it part of your customer relationship building. Call around 7 days (if on 30 days) prior to the payment being due and confirm everything is in place (product in place / working, service completed and satisfactory, copy of invoice in place and approved for payment and then when the payment is to be made).

3. If payment does not come in then you need to ask the right questions quickly, be assertive but not rude. Direct questions such as "Why have you not be able to keep to the agreed terms?"

4. Difference of regular or one-time customer: NO. If they have not paid they are not a customer until they have done.

LINK <- One of my older blogs on the subject that may help. (not updated the blog in a while as I have a new integrated website/blog coming soon.

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Premium Member

Premium Member

Sean has given you some great advice Mountain Man and I'd strongly agree that it is important to have a credit control system in place for your business. When someone owes you money, remember that it is your money and you should not be reluctant to contact them and ask for it to be paid, within the terms of your agreement with them.

If you are providing goods or services to a client an an ongoing basis you should set a credit limit for that client. This is the maximum amount of credit that you will give to the client. Communicate this limit to the client before you start doing business with them and then enforce the limit. If they go over the limit, ask them for payment before you will supply them with any further goods or services.

Including a retention of title clause in your contracts and invoices can also be very helpful. This is a term that states that you own the goods, until they are paid for by the client. A retention of title clause can be particularly important in the event that one of your clients goes into liquidation, as it can allow you to claim that the goods are yours and hence allow you to remove the goods from the client's premises.

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Member

Good advice. I like the idea of contacting the customer before the account is overdue, to see if they are satisfied with the work. I may need to put a retention title clause in although most of my invoice is labor or parts that cannot be retrieved (wire in the walls). Although my invoices say 30 days, I have not put terms on my invoices with interest for overdue accounts. I think that will be next. I have also found customers have different' payment styles, some pay right away other wait.

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Member

If you want some ideas on credit or collection processes drop me a note sometime. I normally charge for process agreements etc. but seeing as you are across the pond from me I can sort you something out as a one off.

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Premium Member

Premium Member

You will have nothing to lose by adding a retention of title clause. If a client is reluctant to pay you or says they can't pay you, the fact that you own the wire in their walls might be a nice incentive for them to take you a bit more seriously.

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